WTI, Brent Set for Third Weekly Drop as Supply Risks Ease

West Texas Intermediate and Brent headed for their third weekly drop as supply risks eased in Libya and Iraq while crude inventories expanded at the U.S. oil hub.

Futures slid as much as 0.7 percent in New York and are poised for the longest run of weekly declines since November. Libya’s supply gained as the Sharara field resumed production and two oil-export terminals reopened. Crude stockpiles at Cushing, Oklahoma, rose the most since January, the Energy Information Administration reported on July 9. Fighting in Iraq, the second-largest OPEC member, hasn’t spread to the country’s south, home to three-quarters of its output.

“Recent news that Libya will resume the export from two major terminals have removed parts of the risk premium,” Thina Saltvedt, an analyst at Oslo-based Nordea Markets, said by e-mail. “And no news that the fighting in Iraq is spreading to the southern oil rich areas have given the oil market a breathing space, at least for the moment.”

WTI for August delivery dropped as much as 71 cents to $102.22 a barrel in electronic trading on the New York Mercantile Exchange and was at $102.28 at 1:50 p.m. London time. The contract climbed 64 cents to $102.93 yesterday, advancing for the first time in 10 days. The volume of all futures traded was about 15 percent below the 100-day average for the time of day. Prices have declined 1.7 percent this week.

Libyan Supply

Brent for August settlement slid as much as $1.09 a barrel, or 1 percent, to $107.58 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a $5.42 premium to WTI on ICE, compared with $6.86 at the end of last week. Open interest across monthly Brent futures was at 1.55 million contracts on July 9, the lowest since the start of June.

Brent is down 2.7 percent this week. Libya, which has Africa’s biggest crude reserves, was producing 350,000 barrels a day yesterday, more than double output about a month ago, according to Mohamed Elharari, a spokesman at National Oil Corp.

Rebels seeking self-rule in Libya’s east surrendered the Es Sider and Ras Lanuf terminals last week to end a yearlong blockade. The Sharara pipeline restarted on July 8, allowing the 340,000 barrel-a-day field to resume production. Libya is currently the smallest producer in the Organization of Petroleum Exporting Countries.

Kirkuk Fields

Tension in Iraq’s north continued today as Kurdish forces took over the Bai Hassan and Kirkuk oilfields, Iraq’s Oil Ministry said in a statement. The Kurd’s Peshmerga forces told workers from the state-run North Oil Co. to either leave or work under the Kurdistan Regional Government’s authority, according to the statement.

“The Kurds have signaled their intentions to start moving Kirkuk oil through their pipeline network,” Richard Mallinson, analyst at consultant Energy Aspects Ltd., says by e-mail. “They still face technical challenges and political barriers to doing that, but certainly this is another step in trying to make their ambitions a reality.”

Shipments from Iraq’s southern region should recover this month to about 2.6 million barrels a day, compared with 2.42 million in June, barring technical problems, the International Energy Agency said today. Production from the northern Kurdistan region surged by more than 50 percent to 360,000 barrels a day last month as more oil was shipped for export, it said.

IEA Forecast

Global oil demand will rise at the fastest pace in five years in 2015 as China leads gains in emerging economies, the IEA said in its first monthly report to assess 2015. World oil consumption will increase next year by 1.4 million barrels a day, higher than an increase of 1.2 million a day in supplies from outside OPEC, the agency said.

Analysts tracked by Bloomberg predict Brent will trade at $107 a barrel in the fourth quarter, down 4.8 percent from June 30, while WTI may decrease 5.1 percent to an average of $100.

In the U.S. crude inventories at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, climbed by 447,000 barrels to 20.9 million. Supplies nationwide dropped by 2.4 million barrels to 382.6 million.

Gasoline stockpiles expanded by 579,000 barrels in the week ended July 4, compared with a median 400,000 barrel drop estimated in a Bloomberg News survey of analysts.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net; Jake Rudnitsky in Moscow at jrudnitsky@bloomberg.net

To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net James Herron, Rachel Graham

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